Are We Making It Easy for China?By: William R. Hawkins The Washington Times | Wednesday, February 13, 2008

On Jan. 29, the House Judiciary Subcommittee on Crime, Terrorism and Homeland Security held a hearing on Chinese espionage.

One
of the witnesses was Larry Wortzel, chairman of the congressionally
chartered U.S.-China Economic and Security Review Commission. Mr.
Wortzel spent 25 of his 32 years in the U.S. Army working in military
intelligence, then ran the Heritage Foundation's Asian Studies Center.
He told the subcommittee that "The commission concluded in 2007 that
China's defense industry is producing new generations of weapon
platforms with impressive speed and quality. We believe that some of
these advancements are due to the highly effective manner in which
Chinese defense companies are integrating commercial technologies into
military systems. ... There is a long record in China going back over
two centuries of sending government-directed missions overseas to buy
or shamelessly steal the best civil and military technology available,
reverse engineer it, and build an industrial complex that supports the
growth of China as a commercial and military power."

His
testimony raises the questions of whether any real line can be drawn
between military and civilian sectors in a Chinese economy dominated by
state-owned and state-controlled firms under a communist regime that
still draws up five-year plans and tightly manages all interaction
between Chinese and foreign enterprises.

The question is not
academic. The Commerce Department recently designated five Chinese
corporations as "vetted end-users" who can now buy restricted
technology with military applications without obtaining export licenses
from the U.S. government.

The notion is that these firms are
civilian enterprises that can be trusted not to pass along information
to other Chinese firms or agencies in the military sector. This notion
is insane. It is the result of heavy lobbying by American firms who
want to sell Beijing whatever it wants, wishing only to make a profit
as China expands.

The highly regarded Wisconsin Project on
Nuclear Arms Control has reported on the ties two of the vetted Chinese
firms have with the Beijing regime and military. Shanghai Hua Hong NEC
Electronics Co. is majority owned through a corporate chain by
state-owned China Electronics Corporation, which produces military
equipment as well as consumer electronics. BHA Aerocomposite Parts Co.
is partly owned by AVIC I, a state-owned aerospace conglomerate that
produces fighters, nuclear-capable bombers, and many other weapon
systems used by the People's Liberation Army. Anyone concerned about
U.S. security in a turbulent world should go to the Wisconsin Project
Web site and read the full report.

Commerce claims it will
monitor the vetted firms, but reports by the Government Accountability
Office (GAO) have questioned the department's ability to do so,
especially in the face of uncooperative Chinese.

A 2006 GAO
report designated "identification and protection of critical
technologies as a government-wide high-risk area" and concluded, "Given
its lack of systematic evaluations, Commerce cannot readily identify
weaknesses in the dual-use export control system or implement needed
corrective measures." GAO earlier reported that Commerce lacks the
personnel to police end-users in China.

The illusion of separation between military and civilian in China
has also come up in the ongoing security review of Huawei Technologies
bid for a 16.5 percent share of 3Comm, an American firm that produces
network security software for the Pentagon. Bain Capital is buying
3Comm with Chinese minority participation. The fear is that Huawei will
not only be able to get access to the firm's technology, but may expand
its control over time, since Bain only buys firms to sell them later
for a profit.

Bain has argued that Huawei is a civilian firm.
However, when the prestigious Rand Corp. published a report on the
Chinese defense industry at the end of 2005, it described Huawei as
representing "the new digital-triangle model, whereby the military,
other state actors, and their numbered research institutes help fund
and staff commercially oriented firms that are designated 'national
champions,' receive lines of credit from state banks, supplement their
R&D funding with directed money, and actively seek to build global
market share. The military, for its part, benefits as a favored
customer and research partner." Anything Huawei gets from 3Comm will go
straight to the PLA for use against American targets.

Yet,
3Comm seems confident the deal will go through. It has called a Feb. 29
shareholder meeting to approve the buyout by Bain and Huawei. The
Committee on Foreign Investment in the United States (CFIUS), which is
conducting the review, is chaired by the Treasury Department, whose
naive view of China rivals that of the Commerce Department.

Republicans
pride themselves on being strong on national security, and believe this
is their trump suit against the Democrats. Certainly, Sen. John McCain
hopes so, as he bids to carry the party's banner into the fallelections.

Unfortunately,
Republicans also think of themselves as the "party of business," making
them vulnerable to the "anything for a buck" pleadings of foreign
traders and lobbyists. China is the test case as to which trait will
prevail in the waning days of the Bush administration.

William Hawkins is a consultant on international economics and national security issues.

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